v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements

12. Fair Value Measurements

Assets and Liabilities Reported at Fair Value

The table below presents our assets and liabilities measured at fair value on a recurring basis as of June 30, 2026, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 

 

Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

—

 

 

$

955

 

 

$

—

 

 

$

955

 

Total assets at fair value

 

$

—

 

 

$

955

 

 

$

—

 

 

$

955

 

 

The table below presents our assets and liabilities measured at fair value on a recurring basis as of December 31, 2025, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 

 

Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

—

 

 

$

(929

)

 

$

—

 

 

$

(929

)

Total liabilities at fair value

 

$

—

 

 

$

(929

)

 

$

—

 

 

$

(929

)

 

There were no transfers into and out of fair value measurement levels during the six months ended June 30, 2026 and 2025.

Derivative Financial Instruments

We entered into interest rate swaps to manage interest rate risk associated with variable-rate debt. The valuation of these instruments was determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows of each derivative. Such valuation reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves, as well as option volatility. The fair values of our interest rate swaps were determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates derived from observable market interest rate curves.

We incorporated credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although we determined that the majority of the inputs used to value our derivative financial instruments fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with this instrument utilized Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparty. However, as of June 30, 2026, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

Financial Instruments Disclosed at Fair Value

Our accompanying condensed consolidated balance sheets include the following financial instruments: debt security investment, cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities, mortgage loans payable and borrowings under our lines of credit and term loan.

We consider the carrying values of cash and cash equivalents, restricted cash, accounts and other receivables and accounts payable and accrued liabilities to approximate the fair value for these financial instruments based upon an evaluation of the underlying characteristics and market data, in light of the short period of time between origination of the instruments and their expected realization. The fair values of such financial instruments are classified in Level 2 of the fair value hierarchy.

The fair value of our debt security investment is estimated using a discounted cash flow analysis using interest rates available to us for investments with similar terms and maturities. The fair values of our mortgage loans payable and our lines of credit and term loan are estimated using discounted cash flow analyses using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that the valuations of our debt security investment, mortgage loans payable and lines of credit and term loan are classified in Level 2 within the fair value hierarchy. The carrying amounts and estimated fair values of such financial instruments as of June 30, 2026 and December 31, 2025 were as follows (in thousands):

 

 

June 30,
2026

 

 

December 31,
2025

 

 

Carrying
Amount(1)

 

 

Fair
Value

 

 

Carrying
Amount(1)

 

 

Fair
Value

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Debt security investment

 

$

92,463

 

 

$

92,982

 

 

$

92,136

 

 

$

93,107

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans payable

 

$

873,352

 

 

$

786,223

 

 

$

966,925

 

 

$

898,892

 

Lines of credit and term loan

 

$

543,010

 

 

$

549,860

 

 

$

547,510

 

 

$

549,946

 

 

(1)
Carrying amount is net of any discount/premium and unamortized deferred financing costs.